Hybrid modeling of industrial energy consumption and greenhouse gas emissions with an application to Canada

In this paper, we explore the implications for Canada's industrial sector of an economy-wide, compulsory greenhouse gas reduction policy, such as a tax or emissions cap and tradable permits system. The model used in the analysis is CIMS, a hybrid energy-economy model that combines characteristics of the contrasting top-down and bottom-up approaches in order to generate useful information for policy makers. CIMS is technologically explicit, behaviorally realistic, and has the ability to model equilibrium feedbacks. However, each of these strengths is linked to challenges when it comes to forecasting the impact of greenhouse gas policy. We explore the strengths and weaknesses of CIMS, and provide results from simulating the response of the Canadian industrial sector to GHG charges implemented throughout the economy, starting in the year 2006 and extending to the year 2030.